An Unsustainable Model

Less service to patients, more institutionalized care and higher costs will occur if competitive bidding is allowed to move forward without changes, according to Brian O’Roark, PhD, assistant professor of economics at Robert Morris University.

AAHomecare couldn’t agree more.

The HME sector is slated to begin the rebid of Round 1 in October, and the chances of the program being a positive experience for providers and beneficiaries are slim due to the fact that CMS continues to move forward without fixing long-standing problems in the bidding system.

“The Impact of Competitive Bidding on the Market for DME — A One Year Update,” the study by Dr. O’Roark, found that CMS drastically misread the marketplace and that the current competitive bidding program reduces overall competition and hurts the quality of patient care. The full report and a summary of findings are available at www.aahomecare.org.

There is nothing competitive about this misconceived program. This study joins a growing body of evidence showing the program will produce fewer competitors and lower quality of care for older Americans and people with disabilities who require medical care at home.

O’Roark’s study analyzed the results for Round 1 of competitive bidding, which took place in 10 areas nationwide in July last year and revealed several disturbing flaws in the program:

• During the bidding implementation, nearly 40 percent of companies awarded durable medical equipment contracts for Pittsburgh patients were located outside of Pennsylvania.
• Had the bidding program continued (Congress delayed it after two weeks), home care providers would have had no choice but to cut service, lengthen patient response times and give up providing some equipment altogether. Contracts were also awarded to unlicensed providers, which would have violated state standards.
• Reduced access and declining quality of care under bidding will force patients into institutionalized care. This will lead to higher long-term costs for Medicare — not lower.
• One group that would benefit from competitive bidding is private insurance firms. Medicare reimbursement rates are often the basis for reimbursement by all other forms of health insurance. Lowering Medicare rates is likely to be followed by a lowering of private plan reimbursement rates. As price schedules fall, insurance firms’ costs fall with them.

Despite the systemic problems identified in this study, the bidding program is set to go into effect on Oct. 21, 2009.

“The bidding program forces an unsustainable business model on the DME industry,” said O’Roark. “Ninety percent of providers were excluded from participating because they could not meet the bid. Those who qualify are forced to sustain prices for three years — an untenable position for any business.”

AAHomecare is working on a legislative measure to stop the program. But members of Congress need to hear directly from their constituents regarding their concerns about bidding. The Association encourages stakeholders to discuss both the patient impact as well as the impact to the DME market when speaking with legislators.

With cost as the primary determining factor, bidding forces consumers to utilize providers with less experience, and forces out providers who use high-quality equipment or provide critical patient services.

The program ignores the provider’s ability to serve a geographic market, meaning fewer home visits to patients in rural areas. By ignoring the role of service, bidding will result in fewer resources for setting up and adjusting wheelchairs, walkers and hospital beds.

Remember, research has shown that home care is preferred by patients and seniors, and is less costly than institutional care.

As designed, this bid program will produce a bureaucratic, anti-competitive, price-setting system that will lead to reduced quality of, and access to, care for patients.

In the end, not only will home care companies be harmed but the program will hurt the group it aims to help — the Medicare beneficiary.

Read more AAHomecare Update columns.

Tyler J. Wilson is president and CEO of the American Association for Homecare, headquartered in Arlington, Va. You can reach him at [email protected]. For more information on critical home care issues, visit the association’s Web site at www.aahomecare.org.